How popular were bond ETFs in the U.S. during 2019? If $150 billion says much, then very popular indeed—according to data from Bloomberg Intelligence, fixed income ETFs took in the most money in one year since 2014 and reached over $800 billion in total assets.

According to a Bloomberg report, the popularity of bond ETFs was spurred by fears “that stocks have reached their peak, continued uncertainty over the direction of U.S. interest rates and rampant geopolitical risks have bolstered demand — especially as traders find more and more innovative ways to strategically use these products.”

Additionally, the more cost-cautious investor is looking at their relatively low expense ratios as an effective way to get core bond exposure as opposed to purchasing the debt issues themselves. Furthermore, investors don’t run into liquidity issues with ETFs if they try to sell the bonds as opposed to a vehicle like the ETF, which can be bought and sold like stocks.

“Investors are seeing the efficiencies that can be found using the ETF vehicle,” said Kevin Flanagan, head of fixed-income strategy at WisdomTree Investments Inc. “Typically you see equity folks take the lead and bond guys follow, and that’s continued.”

The Bloomberg report noted that the current crop of fixed income funds comprises $4.4 trillion, but global investment firm BlackRock is projecting that figure could jump to $2 trillion within the next few years. That popularity is also showing itself in other parts of the world like Europe, Australia and Taiwan.

For the first time in three years, bond ETFs took in more money than stock funds in Europe.

“There’s a huge wave of wealth retiring, and bonds are traditionally the safe-haven asset that preserves wealth,” said Will McGough, chief investment officer of retirement strategies at Stadion Money Management.

Core Bond Exposure in the AGGregate

Investors who are ready to hop aboard the fixed income ETF train can look to core bond exposure via the  iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG).

Fund facts:

  • AGG seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index.
  • The index measures the performance of the total U.S. investment-grade bond market.
  • The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.

Reasons to use AGG:

  • Broad exposure to U.S. investment-grade bonds
  • A low-cost easy way to diversify a portfolio using fixed income
  •  Use at the core of your portfolio to seek stability and pursue income

For more market trends, visit ETF Trends.